However, to gain from your mutual fund investments, here is a list of some of the more common mistakes that you should avoid:
- Investing without considering fund objective and financial goals Irrespective of the investment vehicle, every investment decision should be in accordance with your financial objectives. In mutual fund investment, it’s important to see that the objective of the fund matches your goal.
- Holding NAV the yardstick for comparison Investors often end up comparing mutual funds basis the Net Asset Value (price of every unit). This principle is fundamentally incorrect.
- Choosing a fund based on its short-term returns It’s advisable to choose funds for investments based on their long-term returns instead of short-term. This is because long-term returns reflect how the fund has performed across market cycles.
- Stopping investment due to short-term volatility
For instance, if the goal is to build a higher education corpus for your child, you should opt for a fund that helps you garner the desired corpus within the stipulated time frame by being aggressive. The governing principle should be to select a fund with a tilt towards equities and see how well has it fared against its respective benchmark index.
No matter what the NAV is, it cannot be one of the determinants of the overall fund’s performance – something that primarily depends on strategies adopted by the fund manager as well as the performance of its underlying assets.
As an investor, you should opt for a fund that has not only offered high returns when the market was up but has also contained losses when it tanked.
There are several instances of investors making gains when they continued with their investments amid turmoil in the market. To keep volatility at bay, it’s prudent to opt for systematic investment plans or SIPs which spread risks over a period of time and averages out the cost of buying.
To make the most out of your mutual fund investments, keep away from these mistakes. Choose a fund that matches your financial objectives and start investing today.
Explore Various Mutual Funds here.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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